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EDA Agenda 05-26-2015 (Workshop Meeting)AGENDA SPECIAL MEETING - ECONOMIC DEVELOPMENT AUTHORITY MONTICELLO CITY COUNCIL PRESENT Monday, May 26, 2015 — 6:15 p.m. North Mississippi Room, Monticello Community Center President: Bill Demeules EDA Members: Tracy Hinz, Bill Tapper, Jim Davidson, Steve Johnson, Councilmembers Lloyd Hilgart and Tom Perrault Others: Mayor Stumpf, Councilmembers Gabler and Posusta, Jeff O'Neill, Angela Schumann, Wayne Oberg 1. Call to Order 2. Purpose of Workshop: Discussion of a potential EDA and/or HRA levy for 2016 3. Review of potential EDA and/or HRA levy for 2016 and notification letter to be sent to Wright County 4. Adjournment Please refer to agenda item #41) for handouts City Council Agenda: 05/26/15 1 4D.Consideration of approving the submission of a letter of intent to Wright County for an EDA and/or HRA levy for 2016 (AS) A.REFERENCE & BACKGROUND: The City Council is asked to approve the submission of a letter of intent to Wright County supporting the adoption of an HRA and EDA levy. During the workshop prior to the regular meeting, information was presented to the City Council regarding each of these types of levies, including the rationale for instituting either levy, amount of revenue generated, impact to the City’s overall levy, and potential impact to a general taxpayer. The goal of the workshop was to present the Council and EDA with information on one of the tools available to support the achievement of the City’s overall goals for economic development. The City is required to formally notify Wright County of its intent to adopt the levy (or levies) by July 1st of the year prior to that intended for levy, in this case, 2016. At this time, the Council is asked only to authorize submission of the letter, not to authorize or adopt either or both levies. Rather, the letter preserves the City’s opportunity to make use of the levy for 2016. The EDA’s attorney has confirmed that the letter is not a legally binding document and does not obligate the City to adopt an EDA or HRA levy. As directed during the workshop, staff will continue to provide information for Council and EDA decision-making purposes on any future consideration for adoption of EDA- related levies. A1. Budget Impact:Northland Securities and Kennedy & Graven were used to assist staff in the research and development of information for the EDA and Council on this issue. The impact for this assistance has been to the EDA’s general fund budget for Miscellaneous Professional Services and totals approximately $2,000. A2. Staff Workload Impact:Staff time on the part of the City Administrator, Finance Director and Community Development Director has been expended in support of the research and presentation of this information. B.ALTERNATIVE ACTIONS: 1.Motion to approve the submission of a letter of intent to Wright County for an EDA and HRA levy for 2016. 2.Motion to deny the submission of a letter of intent for an EDA and HRA levy for 2016. City Council Agenda: 05/26/15 2 C. STAFF RECOMMENDATION: Staff recommends Alternative Action #1. Submission of the letter at this time preserves the City’s opportunity to institute the levy for 2016. It does not obligate the Council to adopt a levy. D. SUPPORTING DATA: Memorandum – Kennedy & Graven, dated March 23rd, 2015 457807v1 MNI MN190-101 Kennedy Offices in Minneapolis Saint Paul St. Cloud 470 U.S. Bank Plaza 200 South Sixth Street Minneapolis MN 55402 (612) 337-9300 telephone (612) 337-9310 fax www.kennedy-graven.com Affirmative Action Equal Opportunity Employer Graven C H A R T E R E D MEMORANDUM TO:Board of Commissioners, Monticello Economic Development Authority FROM:Martha Ingram, Kennedy & Graven, Chartered CC:Tammy Omdal, Northland Securities, Inc. DATE:March 23, 2015 RE:HRA/EDA Tax Levies You have requested an explanation of the authority for the two types of levies available to the City of Monticello Economic Development Authority (“EDA”), and some historical background on those levies. The two levies are sometimes referred to as the “HRA levy” and the “EDA levy,” described as follows. 1.HRA levy Under Minnesota Statutes, Sections 469.091 an economic development authority has all the powers of a housing and redevelopment authority under Sections 469.001 to 469.047 (the “HRA Act”), unless those powers are limited by the City’s enabling resolution that established the authority. The enabling resolution that established the Monticello EDA contained no such limitations, and in fact, in about 2008, the City acted to consolidate the functions of the EDA and HRA and to bring all such functions under the purview of the EDA. Therefore, the EDA may essentially act as a housing and redevelopment authority and exercise all powers under the HRA Act, as well as exercising its economic development powers under Minnesota Statutes, Sections 469.090 to 469.1081 (the “EDA Act”). Under Section 469.033 of the HRA Act, an HRA may levy a tax on its area of operation for the purposes authorized under the HRA Act, subject to consent by the city council. The levy may not exceed .0185 percent of the taxable market value in the City. The “area of operation” of the authorityis the boundaries of the City. Since the EDA has all the powers of a housing and redevelopment authority, the EDA may levy the tax authorized under Section 469.033, subject to the same limitations and procedures that would apply if it were levied by a housing and redevelopment authority. The HRA levy has two important features. First, the proceeds must be used only “for the purposes of [the HRA Act].” Minnesota Statutes, Section 469.033, subd. 6. Those purposes, broadly, include redevelopment to correct or prevent blight, and development of or assistance to housing for low or moderate income persons. & 457807v1 MNI MN190-101 Second, the HRA levy is technically raised by the EDA (using its HRA Act powers), albeit approved by the City Council. The levy amount is above and beyond any levy limits that apply to the City; the only limit is the .0185% of market value described above. As such, the HRA levy is a reliable source of revenue independent of City revenues. As shown in Exhibit A, attached, the maximum HRA levy authorized for 2015 in Monticello is $280,011. 2.EDA levy Section 469.107 of the EDA Act provides separate authority for a tax levy to benefit the EDA. Under this provision, the City levies the tax at the request of the EDA. The amount levied is limited to .01813 percent of the taxable market value in the City (a higher levy is permissible but subject to reverse referendum). For Monticello in 2015, the maximum authorized EDA levyis $274,410. This levy is different from the HRA levy in two respects. First, it is made by the City for the benefit of the EDA, at the EDA’s request. The amount is within the City’s overall levy limits. As such, it is essentially the same as an appropriation to the EDA from the City’s general funds. In any year in which levy limits apply, the EDA levy would compete with general City needs. As such, the EDA levyis not as stable, and consequentlyis not frequentlyused (at least among the cities I work with). Second, the statute does not expressly limit the proceeds to any particular use, but the implication is that they may be used for any activity an EDA is authorized to carry out under the EDA Act. Those uses include housing and redevelopment activities under the HRA Act, but also broader economic development activities. That is, the EDA levy has a slightly higher limit, and fewer restrictions on use; however, these benefits tend to be overshadowed by the City levy limit problem described above. The existence of these two separate levies can be explained by the history of the EDA Act. That statute was enacted in 1986, and was intended (by its proponents) as mechanism to consolidate development and redevelopment powers in a single agency. However, that concept became somewhat controversial, and the powers of economic development authorities were scaled back during the course of the legislative session. The final result was a statute that provides some new powers for economic development authorities, coupled with the cross-referenced powers of housing and redevelopment authorities and cities. In practice, the cross-referenced powers have been more beneficial. The City could, if it chose, use both the EDA levy and the HRA levy, as long as the EDA levy is used for purposes other than housing and redevelopment. Again, this strategy would be no different than simply appropriating City funds to the EDA, in addition to allowing the EDA to raise its own levy (using the HRA levy power). 3.Process If the EDA wishes to levy an HRA levy, the steps required are fairly straightforward. First, the EDA must prepare and file an annual budget (for its housing and redevelopment activities) in accordance with the budget procedures of the City. The EDA must request that the City Council approve a levy based on this budget. The City Council must review the budget and consent to 457807v1 MNI MN190-101 the HRA levy by resolution. No public hearing is required for this process. Once adopted, the HRA levy is included in the City’s preliminary levy certification and is collected by the County in the same manner as general City taxes, but is kept in a separate fund and turned over to the EDA directly. The process is basically the same if the EDA wishes to institute an EDA levy. As previously stated, though, the EDA levy should be considered to be part of the City’s general levy, rather than a special levy independent of City revenues. Once the EDA levy is in place, it may be increased above the statutory limit, but only if the following requirements are met. First, the City Council must adopt a resolution stating the proposed amount of the increase. The resolution and a notice of public hearing must then be published for two successive weeks in the official newspaper of the City, with the first publication taking place at least two weeks before the public hearing. After the hearing, the City Council may (but is not required to) adopt a resolution authorizing the proposed increase or a lesser increase. This resolution must also be published once. If a petition requesting a referendum on the increase, signed by voters equaling at least 5 percent of the votes cast in the most recent general election, is filed with the City Clerk within 30 days of publication, the resolution will not become effective and an election on the increase will be required. 4.Calculation of City Taxes Attributable to Decertified TIF Districts You also requested information on the amount of taxes that will be available to the City upon decertification of various tax increment financing (“TIF”) districts that are nearing the end of their statutory terms. As shown in Exhibit A, there are three TIF districts that will be decertified in the near future: TIF District No. 36 (decertified by end of 2015), TIF District No. 37 (decertified by end of 2015), and TIF District No. 38 (decertified by end of 2017). Upon decertification of these TIF districts, property taxes currently paid over to the City as tax increment from parcels within the TIF districts will instead be distributed by Wright County to the normal taxing jurisdictions, resulting in an increase in tax revenues available for general City purposes. The estimated additional city taxes that will become available as a result of decertifying TIF District No. 36 and TIF District No. 37 at the end of 2015 is $32,028. The additional amount available at the end of 2017 will be approximately $4,887. In total, the annual amount of property tax going to the City’s general fund after the end of 2017 is approximately $37,000. 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